Economic Survey 2019-20

economic survey

Question: Consider the following statements with reference to Economic Survey 2019-20:
(1) Wealth Creation is the theme for this survey.
(2) Top export products are Petroleum products, precious stones, drug formulations & biological.
(3) The best suitable meaning of Thalinomics is the Economics of a Plate of Food in India.
Choose the correct statement/s:
(a) Only(1)
(b) Only(2)
(c) Both(1) and (2)
(d) All the above
Answer:(c)
Related facts:

  • The Union Minister for Finance & Corporate Affairs, Smt. Nirmala Sitharaman presented the Economic Survey 2019-20 in the Parliament on January31, 2020 .
  • The Key Highlights of the Economic Survey 2019-20 are as follows:
  • Theme of economic survey 2019-20 is Wealth Creation: The Invisible Hand Supported by the Hand of Trust.
  • India’s dominance as global economic power for three-fourths of economic history manifests by design.
  • Kautilya’s Arthashastra postulates the role of prices in an economy (Spengler, 1971).
  • Historically, Indian economy relied on the invisible hand of the market with the support of the hand of trust:
  • Invisible hand of the market reflected in openness in economic transactions.
  • Hand of trust appealed to ethical and philosophical dimensions.
  • Survey posits that India’s aspiration to become a $5 trillion economy depends critically on:
  • Strengthening the invisible hand of the market.
  • Supporting it with the hand of trust.

Strengthening the invisible hand by promoting pro-business policies to:

  • Provide equal opportunities for new entrants.
  • Enable fair competition and ease doing business.
  • Eliminate policies unnecessarily undermining markets through government intervention.
  • Enable trade for job creation.
  • Efficiently scale up the banking sector.
  • Introducing the idea of trust as a public good, which gets enhanced with greater use.
  • Survey suggests that policies must empower transparency and effective enforcement using data and technology.

Entrepreneurship and Wealth Creation at the Grassroots

  • Entrepreneurship as a strategy to fuel productivity growth and wealth creation.
  • India ranks third in number of new firms created, as per the World Bank.

Pro-business versus Pro-markets

  • Survey says that India’s aspiration of becoming a $5 trillion economy depends critically on:
  • Promoting ‘pro-business’ policy that unleashes the power of competitive markets to generate wealth.
  • Weaning away from ‘pro-crony’ policy that may favour specific private interests, especially powerful incumbents.
  • Pro-crony policies such as discretionary allocation of natural resources till 2011 led to rent-seeking by beneficiaries while competitive allocation of the same post 2014 ended such rent extraction.

Undermining Markets: When Government Intervention Hurts More Than It Helps

  • Government intervention, though well intended, often ends up undermining the ability of the markets to support wealth creation and leads to outcomes opposite to those intended.

Creating Jobs and Growth by Specializing in Network Products

  • Survey says India has unprecedented opportunity to chart a China-like, labour-intensive, export trajectory.
  • By integrating “Assemble in India for the world” into Make in India, India can:
  • Raise its export market share to about 3.5 % by 2025 and 6 % by 2030.
  • Create 4 crore well-paid jobs by 2025 and 8 crore by 2030.
  • Exports of network products can provide one-quarter of the increase in value added required for making India a $5 trillion economy by 2025.
  • India’s exports increased by 13.4 % for manufactured products and 10.9 % for total merchandise
  • Imports increased by 12.7 % for manufactured products and 8.6 per cent for total merchandise.
  • India gained 0.7 % increase in trade surplus per year for manufactured products and 2.3 % per year for total merchandise.

Targeting Ease of Doing Business in India

  • A jump of 79 positions to 63 in 2019 from 142 in 2014 in World Bank’s Doing Business rankings.
  • India still trails in parameters such as Ease of Starting Business, Registering Property, Paying Taxes and Enforcing Contracts.

Golden jubilee of bank nationalisation: Taking stock

  • Survey observes 2019 as the golden jubilee year of bank nationalization
  • Accomplishments of lakhs of Public Sector Banks (PSBs) employees cherished and an objective assessment of PSBs suggested by the Survey.
  • Since 1969, India’s Banking sector has not developed proportionately to the growth in the size of the economy.
  • India has only one bank in the global top 100 – same as countries that are a fraction of its size: Finland (about 1/11th), Denmark (1/8th), etc.

Thalinomics: The Economics of a Plate of Food in India

  • An attempt to quantify what a common person pays for a Thali across India.
  • A shift in the dynamics of Thali prices since 2015-16.
  • Absolute prices of a vegetarian Thali have decreased significantly since 2015-16 across India and the four regions; though the price has increased during 2019-20.
  • Post 2015-16:
  • Average household gained close to Rs. 11, 000 on average per year from the moderation in prices in the case of vegetarian Thali.
  • Average household that consumes two non-vegetarian Thalis gained close to Rs. 12, 000 on average per year during the same period.
  • From 2006-07 to 2019-20:
  • Affordability of vegetarian Thalis improved 29 %.
  • Affordability of non-vegetarian Thalis improved by 18 %.

India’s Economic Performance in 2019-20

  • India’s GDP growth moderated to 4.8 % in H1 of 2019-20, amidst a weak environment for global manufacturing, trade and demand.
  • Real consumption growth has recovered in Q2 of 2019-20, cushioned by a significant growth in government final consumption.
  • Growth for ‘Agriculture and allied activities’ and ‘Public administration, defense, and other services’ in H1 of 2019-20 was higher than in H2 of 2018-19.
  • India’s external sector gained further stability in H1 of 2019-20:
  • Current Account Deficit (CAD) narrowed to 1.5 % of GDP in H1 of 2019-20 from 2.1 % in 2018-19.

Headline inflation expected to decline by year end:

  • Increased from 3.3 % in H1 of 2019-20 to 7.35 % in December 2019-20 due to temporary increase in food inflation.
  • Financial sector acted as a drag on the real sector (investment-growth-consumption).
  • Reforms undertaken during 2019-20 to boost investment, consumption and exports:
  • Speeding up the insolvency resolution process under Insolvency and Bankruptcy Code (IBC).
  • Easing of credit, particularly for the stressed real estate and NBFC sectors.
  • Announcing the National Infrastructure Pipeline 2019-2025.
  • Survey expects an uptick in the GDP growth in H2 of 2019-20:
  • 5 % GDP growth for 2019-20 based on CSO’s first Advance Estimates.
  • Expeditious delivery on reforms for enabling the economy to strongly rebound in 2020-21.

Fiscal Developments

  • Revenue Receipts registered a higher growth during the first eight months of 2019-20, compared to the same period last year, led by considerable growth in Non-Tax revenue.
  • Gross GST monthly collections have crossed the mark of Rs. 1 lakh crore for a total of five times during 2019-20 (up to December 2019).

Balance of Payments (BoP):

  • India’s BoP position improved from US$ 412.9 bn of forex reserves in end March, 2019 to US$ 433.7 bn in end September, 2019.
  • Current account deficit (CAD) narrowed from 2.1% in 2018-19 to 1.5% of GDP in H1 of 2019-20.
  • Foreign reserves stood at US$ 461.2 bn as on 10th January, 2020.

Global trade:

  • In sync with an estimated 2.9% growth in global output in 2019, global trade is estimated to grow at 1.0% after having peaked in 2017 at 5.7%.
  • However, it is projected to recover to 2.9% in 2020 with recovery in global economic activity.
  • India’s merchandise trade balance improved from 2009-14 to 2014-19, although most of the improvement in the latter period was due to more than 50% decline in crude prices in 2016-17.
  • India’s top five trading partners continue to be USA, China, UAE, Saudi Arabia and Hong Kong.

Exports:

  • Top export items: Petroleum products> precious stones> drug formulations & biologicals, gold and other precious metals.
  • Largest export destinations in 2019-20 (April-November): United States of America (USA), followed by United Arab Emirates (UAE), China and Hong Kong.

Imports:

  • Top import items: Crude petroleum, gold, petroleum products, coal, coke & briquittes.
  • India’s imports continue to be largest from China, followed by USA, UAE and Saudi Arabia.

Logistics industry of India:

  • Currently estimated to be around US$ 160 billion.
  • Expected to touch US$ 215 billion by 2020.
  • According to World Bank’s Logistics Performance Index, India ranks 44th in 2018 globally, up from 54th rank in 2014.
  • Net FDI inflows continued to be buoyant in 2019-20 attracting US$ 24.4 bn in the first eight months, higher than the corresponding period of 2018-19.

Monetary Management and Financial Intermediation

  • Monetary policy:
  • Remained accommodative in 2019-20.
  • Repo rate was cut by 110 basis points in four consecutive MPC meetings in the financial year due to slower growth and lower inflation.
  • However, it was kept unchanged in the fifth meeting held in December 2019.
  • In 2019-20, liquidity conditions were tight for initial two months; but subsequently it remained comfortable.

The Gross Non Performing Advances ratio:

  • Remained unchanged for Scheduled Commercial banks at 9.3% between March and September 2019
  • Increased slightly for the Non-Banking Financial Corporations (NBFCs) from 6.1% in March 2019 to 6.3% in September 2019.
  • Credit growth:
  • The financial flows to the economy remained constrained as credit growth declined for both banks and NBFCs.
  • Bank Credit growth (YoY) moderated from 12.9% in April 2019 to 7.1% as on December 20, 2019.
  • Capital to Risk-weighted Asset Ratio of SCBs increased from 14.3% to 15.1% between March 2019 and September 2019.

Prices and Inflation

  • • Inflation Trends:
  • Inflation witnessing moderation since 2014
  • Consumer Price Index (CPI) inflation increased from 3.7 per cent in 2018-19 (April to December, 2018) to 4.1 per cent in 2019-20 (April to December, 2019).
  • WPI inflation fell from 4.7 per cent in 2018-19 (April to December, 2018) to 1.5 per cent during 2019-20 (April to December, 2019).

Sustainable Development and Climate Change

  • India moving forward on the path of SDG implementation through well-designed initiatives
  • SDG India Index:
  • Himachal Pradesh, Kerala, Tamil Nadu, Chandigarh are front runners.
  • Assam, Bihar and Uttar Pradesh come under the category of Aspirants.
  • India hosted COP-14 to UNCCD which adopted the Delhi Declaration: Investing in Land and Unlocking Opportunities.
  • COP-25 of UNFCCC at Mandrid
  • 24.56 % of the geographical area of the country.
  • International Solar Alliance (ISA)
  • ‘Enabler’ by institutionalizing 30 Fellowships from the Member countries.
  • ‘Facilitator’ by getting the lines of credit worth US$ 2 Billion from EXIM Bank of India and 1.5 Billion from AfD, France.
  • ‘Incubator’ by nurturing initiatives like the Solar Risk Mitigation Initiative.
  • ‘Accelerator’ by developing tools to aggregate demand for 1000 MW solar and 2.7 lakh solar water pumps.

Agriculture and Food Management

  • GVA at Basic Prices for 2019-20 from ‘Agriculture, Forestry and Fishing’ sector is estimated to grow by 2.8 %.
  • Agricultural productivity is also constrained by lower level of mechanization in agriculture which is about 40 % in India, much lower than China (59.5 %) and Brazil (75 %).
  • Skewed pattern of regional distribution of agricultural credit in India:
  • Low credit in Hilly, Eastern and North Eastern states (less than 1 % of total agricultural credit disbursement).
  • Livestock income has become an important secondary source of income for millions of rural families:
  • An important role in achieving the goal of doubling farmers’ income.
  • Livestock sector has been growing at a CAGR of 7.9 % during last five years.
  • During the last 6 years ending 2017-18, Food Processing Industries sector has been growing:
  • Average Annual Growth Rate (AAGR) of around 5.06 %
  • Constitutes as much as 8.83 % and 10.66 % of GVA in Manufacturing and Agriculture sector respectively in 2017-18 at 2011-12 prices.
  • While interests of the vulnerable sections of the population need to be safeguarded, Survey emphasizes on sustainability of food security operations by:
  • Addressing the burgeoning food subsidy bill.
  • Revisiting the rates and coverage under NFSA.

Industry and Infrastructure

  • The industrial sector as per Index of Industrial Production (IIP) registered a growth of 0.6 per cent in 2019-20 (April-November) as compared to 5.0 % during 2018-19 (April-November).
  • Fertilizer sector achieved a growth of 4.0 % during 2019-20 (April-November) as compared to (-) 1.3 per cent during 2018-19 (April-November).
  • Steel sector achieved a growth of 5.2 % during 2019-20 (April-November) as compared to 3.6 % during 2018-19 (April-November).
  • Total telephone connections in India touched 119.43 crore as on September 30, 2019.
  • The installed capacity of power generation has increased to 3, 64,960 MW as on October 31, 2019 from 3, 56,100 MW as on March 31, 2019.
  • Report of the Task Force on National Infrastructure Pipeline released on 31.12.2019 has projected total infrastructure investment of Rs. 102 lakh crore during the period FY 2020 to 2025 in India.

Services Sector

  • Increasing significance of services sector in the Indian economy:
  • About 55 % of the total size of the economy and GVA growth.
  • Two-thirds of total FDI inflows into India.
  • About 38 per cent of total exports.
  • More than 50 % of GVA in 15 out of the 33 states and UTs.

Social Infrastructure, Employment and Human Development

  • The expenditure on social services (health, education and others) by the Centre and States as a proportion of GDP increased from 6.2 % in 2014-15 to 7.7 % in 2019-20 (BE).
  • India’s ranking in Human Development Index improved to 129 in 2018 from 130 in 2017:
  • With 1.34 % average annual HDI growth, India is among the fastest improving countries
  • The share of regular wage/salaried employees has increased by 5 percentage points from 18 % in 2011-12 to 23 % in 2017-18.
  • Total formal employment in the economy increased from 8 % in 2011-12 to 9.98 % in 2017-18.
  • Around 60 % of productive age (15-59) group engaged in full time domestic duties.
  • Access to health services inter-alia through Ayushman Bharat and Mission Indradhanush across the country has improved.
  • Mission Indradhanush has vaccinated 3.39 crore children and 87.18 lakh pregnant women of 680 districts across the country.
  • About 76.7 % of the households in the rural and about 96 % in the urban areas had houses of pucca structure.
  • A 10 Year Rural Sanitation Strategy (2019-2029) launched to focus on sustaining the sanitation behavior change and increasing access to solid and liquid waste management.

Links:
https://pib.gov.in/newsite/PrintRelease.aspx?relid=197771